"Because GS has critical exposure to EU toxics. I could see that when CNBC took a zoom shot of the outside of GS HQ with Gary Kaminski in the foreground".

What? I mean, isn't it even interesting?

I kept this on my "what's this about?" list.

This is what GS says:

Goldman Sachs said its average daily VaR increased to $135 million from $102 million amid heightened volatility. The firms, which released quarterly earnings this week, define VaR as their biggest anticipated one- day trading loss 95 percent of the time.

..........

Goldman Sachs said its exposure to European sovereigns and companies before hedges was $3.9 billion, down by $300 million from the previous quarter, without providing details. The New York-based firm’s VaR increase was caused by “significantly greater volatility in the interest-rate category,” Chief Financial Officer David Viniar said on a Jan. 18 conference call with analysts. The bank includes sovereign and corporate debt within the interest-rate category for VaR calculation purposes

And cryptically, (well, I think it means, we're stuck with some really shitty paper and nobody wants to insure it):

One way to solve this eurozone-specific problem of capital shifts would be to prohibit member nations from selling government bonds to investors from other countries. Allowing only the citizens of a nation to hold that government’s debt would, for example, prevent the investment of Spanish savings in German government debt. Most of the Spanish savings that have been used to buy other countries’ government debt would therefore return to Spain. This would push Spanish government bond yields down to the levels observed in the U.S. and the U.K., thereby helping the Spanish government implement the fiscal stimulus required during a balance sheet recession.

<<<Solution for Euro: allow only nationals to buy government bonds One way to solve this eurozone-specific problem of capital shifts would be to prohibit member nations from selling government bonds to investors from other countries.>>>

Hmmm. You want me to buy my own garbage bonds? I don't think so. I suppose you could put a gun to my head but...

<<<Allowing only the citizens of a nation to hold that government’s debt would, for example, prevent the investment of Spanish savings in German government debt.>>>

Unless you take my money from me I'd spent it or maybe give it to the local loan shark to put on the street and split da vig.

<<<Most of the Spanish savings that have been used to buy other countries’ government debt would therefore return to Spain.>>>

<<<This would push Spanish government bond yields down to the levels observed in the U.S. and the U.K., thereby helping the Spanish government implement the fiscal stimulus required during a balance sheet>>> recession.>>>

There is still a lot more "faith" in the U.S. and U.K. gov't than the Spanish gov't.

I do not believe you can stop or contain "capital shifts"Capital moves as capital wants to move.Capital chases ROI, aka more "munee" or it buys power.It can be confiscated but then it becomes worthless. After all, in that case it's all about power.

One way to solve this eurozone-specific problem of capital shifts would be to prohibit member nations from selling government bonds to investors from other countries.

Allowing only the citizens of a nation to hold that government’s debt would, for example, prevent the investment of Spanish savings in German government debt.

Spain and everybody else in the EMU are trapped in the Euro currency. Unfortunately it does not fit the needs of, for example, both Germany and Spain, although given the nature of their respective powers it more fits the needs of Germany. For the size of its economy Spain had the largest real estate bubble in the world and most of its banks are toast. It is in total depression: folk are not spending or investing; they are desperately saving and paying down debt and some are starting to go hungry. If it had its own currency, Spain's debt, deficit and banking problems would be something for the Spanish and the market to sort out. But it does not have its own currency. It has the Euro.

Therefor, as Koo points out, Spanish pension funds and banks can, with no currency risk, buy foreign bonds instead of Spanish. Thus Spain can not get access to Spanish savings to create stimulus by either lower taxes or greater government expenditures. (Slashing taxes and running a deficit is the side of fiscal policy that Koo doesn't talk about).

If they are to remain in the Euro, what else might they do but confine nationals to buying the country's bonds? As it stands right now they are confined to the German requirement of austerity which is absolutely the worst thing they can do.

Would this work the way Koo says:

Most of the Spanish savings that have been used to buy other countries’ government debt would therefore return to Spain. This would push Spanish government bond yields down to the levels observed in the U.S. and the U.K., thereby helping the Spanish government implement the fiscal stimulus required during a balance sheet recession.

I could sell it to the Spanish on the basis of this is like war and fuck the Germans and French. Situation there is desperate.

Hmmm. You want me to buy my own garbage bonds? I don't think so. I suppose you could put a gun to my head but...

Nothing really wrong with Spanish bonds. Spanish people have been buying them for years. It's their pension funds and banks that have been moving money out. And remember, this does not stop folk from buying foreign corporates, or common stock.

No need for a gun. Just slash taxes (and get a bunch of fat Germans to come and spend). 'It's our deficit we own it, not the f'ing French or Germans.'

This would cause a hell of a row if, for example, the Spanish did it on their own but if the EU is to survive as something other than a fading away gerontological fiefdom of the Germans and French, then this is the sort of thing the smaller nations will have to do.

There is still a lot more "faith" in the U.S. and U.K. gov't than the Spanish gov't.

Among other things he thinks the US is starting to look promising.....

Korea on every measure scores better than any G7 economy except Canada, "so why do we call it an emerging economy?"

Rose asked him about the EU at the end of the year and O'Neil said the most likley thing is that it's still altogether including greece simply because the cost of someone leaving is so unknown but he says it's his "best guess." But here's always a small chance of a disorderly Greek default with unfortunate German response - "you're out" - and possible political repercussions in France and elsewhere with maybe a "Lehman moment".... He says in the Anglo-Saxon investing world there are folk who, since they never believed from the start Euro was a good idea think that now it looks so weak,." it will all unravel. But it won't be as easy as that"

What happens in China depends on what China does; they are very set on that particularly since events of last August....effective convertability of Reminbi by 2015....

Between 13:00 and 40:00 it gets very interesting as he talks about China and the US. US productivity gains, demographics, energy sufficiency, how soon US might meet Chinese productivity.

Tensions with Iran have risen, with Vice President Reza Rahimi warning on Dec. 27 that Iran, the second-biggest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, may close the Strait of Hormuz if western nations block its crude oil sales.

A potential decision by the EU to freeze Iran’s central bank assets and impose a ban on Iranian oil imports requires unanimous backing among the bloc’s 27 nations. The embargo would hurt Greece, Italy and Spain, which depend on Iranian supplies and would need to find alternative sources.

U.S. President Barack Obama on Dec. 31 signed into law measures that deny access to the U.S. financial system to any foreign bank that conducts business with the central bank of Iran. The law includes language that allows the president to waive the sanctions if he determines they would threaten national security.

With the noose tightening in spite of Indian and other cheating Iran will have to close the Straits to force DM to waive sanctions.

Do you think that hack Durden has better info than I do? Worse, the guy is a headline monger, and that means counter productive exaggerator. If you like what he says, why not make your own comments without referring to him and not posting a link. You have better judgment than he has.